Published August 1980
| Draft
Working Paper
Open
Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models
- Creators
-
Plott, Charles R.
- Sunder, Shyam
Chicago
An error occurred while generating the citation.
Abstract
The study reports on the applicability of competing models of market information integration and dissemination in explaining the behavior of simple laboratory, one-period security markets. Returns to the security depended upon a randomly chosen state of nature. Some agents (insiders), whose identity was unknown to other agents, knew the state before the markets opened. With replication of market conditions a model based upon rational expectations principles is relatively accurate. Prices adjusted immediately to near rational expectations prices; profits of insiders were virtually indistinguishable from noninsiders; and efficiency levels converged to near 100 percent.
Additional Information
Revised preliminary draft. Original dated to July 1980. The financial support of the National Science Foundation, Coopers and Lybrand Foundation, and the Caltech Program for Enterprise and Public Policy is gratefully acknowledged. We have benefited from many conversations with Robert Forsythe and James Jordan. We would also like to thank Stanley Reiter whose comments led to experiment 5. Published as Plott, Charles R., and Shyam Sunder. "Efficiency of experimental security markets with insider information: An application of rational-expectations models." Journal of political economy 90.4 (1982): 663-698.Attached Files
Draft - sswp331_-_revised.pdf
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sswp331_-_revised.pdf
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Additional details
- Eprint ID
- 82260
- Resolver ID
- CaltechAUTHORS:20171010-135309558
- NSF
- Coopers and Lybrand Foundation
- Caltech Program for Enterprise and Public Policy
- Created
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2017-10-11Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 331